Sam Bankman-Fried, the founder of collapsed cryptocurrency exchange FTX, issued his first detailed legal defense since prosecutors charged him with fraud, seeking to dismiss several of the charges and claiming that the high-powered law firm representing FTX in its bankruptcy has been doing the bidding of the government.
In court filings late Monday, lawyers for Bankman-Fried said that FTX and his lawyers at the firm Sullivan & Cromwell had become de facto agents for the federal prosecutors who built the criminal case against him and may be hiding crucial tests.
“FTX legal counsel went to the government to accuse Mr. Bankman-Fried behind his back without learning all the facts and ultimately forced him to resign as CEO,” the lawyers wrote.
For months, Sullivan & Cromwell has funneled documents and other evidence to the prosecution, according to the documents. Lawyers for Mr Bankman-Fried claimed that prosecutors had been seeking only the most incriminating documents, although FTX could also be sitting on material that could help the defence.
In fact, they argued, prosecutors have been “outsourcing” the legal requirement to provide potentially useful material to the defense team, transferring that responsibility to a “private party” with no obligation to Mr. Bankman-Fried.
Representatives for FTX, Sullivan & Cromwell and the US Attorney’s Office in Manhattan did not immediately respond to requests for comment.
Federal prosecutors have charged Mr. Bankman-Fried with orchestrating a major fraud that embezzled billions of dollars in money from FTX clients. Authorities also charged him with money laundering, bribing the Chinese government and overseeing an illegal campaign finance scheme that invested tens of millions of dollars in Democratic and Republican candidates.
Mr. Bankman-Fried, 31, pleaded not guilty to those charges. His lawyers from the New York firm Cohen & Gresser have said they are prepared to go to trial in Manhattan federal court beginning in October.
Mr. Bankman-Fried was released on bail in December but confined to his parents’ home in Palo Alto, California. He is facing an uphill legal battle. Three of his top colleagues have pleaded guilty and are cooperating with prosecutors. If convicted, he could spend decades in federal prison.
The motions filed Monday are most likely the first of many attempts by Bankman-Fried’s legal team to seek the production of more prosecutors’ documents or to persuade Judge Lewis A. Kaplan of United States District Court in Manhattan to dismiss some of the 13 counts against you.
In all, Mr. Bankman-Fried seeks to dismiss 10 of the charges. The filings argue that four of the charges, including the foreign bribery charge, the campaign finance charge and a bank fraud charge, violated elements of the extradition process between the United States and the Bahamas, where Mr. Bankman -Fried was arrested. In extradition cases, prosecutors are often limited in bringing new charges after the defendant has been transferred.
Defense attorneys argued that another six of the charges should be dismissed for being too vague or having other legal flaws. They said that prosecutors had shown a “eagerness to bring charges against Mr. Bankman-Fried”.
Much of the defense’s initial strategy also focuses on Sullivan & Cromwell’s role in the case. Mr. Bankman-Fried had retained lawyers from the firm to help with a variety of legal tasks before FTX collapsed. When the stock market imploded, the lawyers at Sullivan & Cromwell took control and appointed a veteran restructuring expert, John Jay Ray III, to replace Mr. Bankman-Fried. One of Mr. Ray’s first acts was to issue a scathing report that FTX under Mr. Bankman-Fried lacked internal controls.
But in January, the US trustee in the bankruptcy case raised objections to the law firm’s representation of FTX, arguing that it had not fully disclosed the scope of its prior legal work for the exchange. One of FTX’s former in-house lawyers claimed in a court filing that Sullivan & Cromwell’s previous work created significant conflicts of interest.
A judge eventually ruled that the company could continue to monitor the bankruptcy.
In Monday’s court documents, Mr. Bankman-Fried portrays Mr. Ray, FTX and Sullivan & Cromwell’s lawyers as all working against him, with the government’s blessing.
Mr. Ray, FTX and the attorneys “have acted as public spokesmen for the government” and “have assumed the role of prosecutor by publicly labeling” Mr. Bankman-Fried as “’the villain,’” the documents say.